Callahan & Blaine Wins Major Appellate Victory in Insurance Bad Faith Case

Prudential Insurance Company sold a life insurance policy to Mark Trapana. Two days later, Mr. Trapana died in a horrific motorcycle accident. Instead of paying Mark's widow, Lisa Trapana, the insurance benefits that it promised to pay - Prudential refused to recognize the insurance policy that its agent had sold. Callahan & Blaine filed suit against Prudential and one week after Callahan & Blaine served its lawsuit, Prudential sent a check for policy benefits directly to Mrs. Trapana. But Prudential did nothing to make up for its bad faith in denying her claim to begin with.

Although a Superior Court judge dismissed Mrs. Trapana's claims because Prudential paid policy benefits after Callahan & Blaine filed suit, Callahan & Blaine aggressively pursued an appeal of the trial court's ruling. The Chairman of Callahan & Blaine's Appellate Department, argued that it was against public policy to allow an insurance company to act in bad faith by denying the existence of an insurance policy and pay claims only if the insured hired an attorney to prosecute her claims. It was argued that the law must impose a penalty on insurance companies for denying claims in the first instance so that insurance companies could act in bad faith with a belief that the worst thing that would happen to them is that they simply would have to pay policy benefits to those insureds who hired attorneys and get to keep the policy benefits they owed to insureds who did not hire lawyers.

An unanimous Court of Appeal in San Diego agreed with Callahan & Blaines analysis and held that Prudential could be held liable for the damage it caused by its wrongful refusal to pay Mrs. Trapana's claim. This included attorneys' fees, emotional distress, and punitive damages. This decision constitutes a significant defeat for the insurance industry's new attitude of "deny the claim" and "pay after sued" policy.

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